For years the jury’s been out on whether or not the awards industry will eventually be absorbed by the promotional products industry, erasing the lines between manufacturers, suppliers and retailers. While there are many similarities—such as decorating processes—in the two industries, insiders say there are a host of differences. One thing’s for sure, there’s growth in both fields. According to the Advertising Specialties Institute, as a collective it’s a $19.6 billion industry, a new record for revenue—up 5.4 percent from 2006. We asked leaders in both the awards and promotional products industries if they see a Pac-Man-like trend occurring in these industries. We spoke to the following people: Anne Lardner, senior manager of communications for Promotional Products Association International; Barry Slee, president/CEO of Slee Corporation, manufacturer of premium glass and crystal products; Dave Pomeroy, publisher of A&E Magazine; Dave Natinsky, president of Sage | Quick Technologies, providing technology-based information services for the promotional products industry; Larry Maloney, sales manager for RS Owens, producer of some of the world’s most prestigious and celebrated awards, including the Oscar®, Emmy, and Clio awards; and Timothy M. Andrews, president/CEO of the Advertising Specialty Institute. Q. Is the awards industry being absorbed by the promotional products industry? Anne Lardner: No. The promotional products industry is complementary to the awards and recognition industry because both are important components of effective marketing plans. Barry Slee: We see very little being absorbed by the promotional products industry. We’re only seeing a small amount of market penetration at the low end (price-point wise), as we are a supplier of medium- to higher-priced engravable products. The promotional products industry has had a long-standing reputation for low-cost, giveaway products. Certainly they are trying to go upstream with more expensive products, but suppliers to the corporate recognition, advertising specialty, and general awards segments still have the lion’s share of the mid- to high-priced awards market. The awards industry as a whole is still served by a very wide spectrum of suppliers. Many of the larger suppliers sell through the promotional products dealers and distributors as well as the advertising specialty dealers and distributors; however, the majority of small- to medium-size awards suppliers still sell directly to the end customer. These end customers include many corporations and entities that still do business with promotional products distributors, but are looking more and more to cut out the middleman, which is often the PPAI or ASI distributor. Dave Pomeroy: There have been warnings of this for years, and there certainly is a great deal of overlap between the two businesses. But when you look at the business models, they have really quite different approaches. And both have their place. But awards retailers should be—and I’m guessing most are—aware of their competition coming from the promotional product marketplace. In any given market, the local trophy and awards shop is likely competing with one or more promotional product businesses that have professional, proactive sales forces offering awards programs to their clientele. That outbound sales force can be an advantage. But awards shops have advantages, too. They have control. They are usually the ones doing the personalization, so they control the quality, timeliness and overall look of the products they sell. Also, awards shops often have brick-and-mortar showrooms that promotional products businesses may not have. Another advantage: Many awards shops offer promotional product items that they don’t decorate themselves, in addition to their regular products that they engrave, sand carve, sublimate and decorate in-house. Dave Natinsky: There has been a trend of more and more traditional awards companies moving toward selling promotional products. Although awards companies have been selling promotional products for years, it is not something new. It will probably be many years down the road before it is “absorbed.” Larry Maloney: The awards segment of the promotional products industry will always be a very important one. We know that in addition to buying promotional products that virtually every company has some type of award and recognition program, and we often advise our customers that if they are not selling awards to their corporate accounts then someone else is. That said, awards remain very distinct from promotional products for a couple of reasons. First, awards go beyond the branding power of promotional products. Promotional products do an exceptional job of marketing a company’s brand and creating an affinity with that brand. I still have my first promotional product—a sweatshirt with the logo of a brand I worked on for my first job out of college. However, awards have the ability to create stronger, more personalized and emotive connections between an individual and the company giving it out. They are a permanent, proud reminder for an individual of an accomplishment or an event that was meaningful to that individual. An award not only strengthens a bond with an employee and a company, it celebrates a personal success. I remember awards that I have received before, and the moment of receiving it, where I was, and reactions around me; these are permanent and powerful memories. I am sure that anyone who has received an award has similar feelings. This is where it is so important to make sure the award received is a top-quality product, to get the eye opening “wow” when the box is opened! Unlike promotional products, you have to do something to earn an award. There are many studies that support the idea that lack of recognition is one of the main reasons why good employees leave their jobs, and the cost of replacing them can be expensive. I was reading a recent poll in an employee/incentive publication that stated that trophies/plaques were one of the top two most meaningful and popular merchandise items among companies. Unlike any other promotional product, awards are always personalized to the individual. Awards are one of the best ways to engage employees. Another important way that awards are not being absorbed by the promotional products industry is that awards serve two distinct markets: corporate recognition and school/academic success. Awards remain the primary way to recognize great athletic accomplishments, and this is a market that promotional products have not yet really penetrated. Tim Andrews: I wouldn’t say that the awards industry is being absorbed by the promotional products industry. Advertising specialties are a complementary industry to the awards and engraving market, and dealers often tell us that they have customers who are already asking for promotional products. So it makes sense for dealers to sell promotional products, in addition to their awards business. An awards dealer can add promotional products to an existing awards business and gain incremental revenue by offering customers more marketing ideas using advertising specialties. For example, if a customer is ordering trophies for an event, a dealer can also suggest cups, pens, mugs, shirts and other imprinted or personalized items that could be handed out to event attendees. Imprinted items that are personalized are powerful and present a unique gift that is difficult to find elsewhere. Dealers in this case are providing extra value and convenience for the customer, and the customer may either already be thinking about the idea of using promotional products or may have been considering it for the first time. Either way, the awards dealer is serving as a one-stop-shop and will impress its clients. Q. How do you view the two industries as being different? Anne Lardner: These two industries have many more similarities than differences. Both are vertical industries focused on rewarding people, recognizing performance and driving behaviors. These industries also have similar channels of distribution, with many small-business owners working face-to-face to meet the needs of their buyer customers. There are also strategic similarities in that both industries use products personalized with names and logos. Barry Slee: The promotional products market is predominately considered to be the lower end of the awards market. The awards market, in general, spans all price levels and ranges from gimmick-type products to some of the most prestigious and expensive award products. Dave Pomeroy: The major difference is what is an award versus what is a promotional product. It can be a subtle difference: If a crystal paperweight on your desk has a company name or logo, it is a promotional product for a corporation. If it says, “Thank you, Brenda, for your service,” that’s an award because it is personalized. Personalization is key, as it often means you will use a different decorating process. But if it’s promoting a business or entity, then it is along the promotional product spectrum. Dave Natinsky: The biggest difference is that the awards market has traditionally been a retail market with storefronts. The promotional products companies have traditionally been non-retail. The other big difference is that the awards market has a different supply chain. Manufacturers will sell blank goods to an awards shop, and then the shop will engrave or imprint the items. Obviously opposite of the promotional products industry is where the manufacturer sends the decorated items to the distributor, who then just delivers the goods. Larry Maloney: First, awards service two markets: corporate recognition and schools/academics. While promotional products are excellent marketing opportunities in the corporate sector, they have not really penetrated the academic market. Second, promotional products can create an affinity and connection between people and the brands that they are marked with. Awards have the opportunity to create an even stronger connection in that they celebrate an individual’s accomplishment and serve as a reminder to self and others about an achievement. Awards seem to have a greater level of complexity and customization options. We are fulfilling more custom projects than ever before, finding ways to integrate logos, color, and even home décor elements into awards to make them more special to the recipients. Finally, awards can have great motivational power. I have several examples of repeat programs where distributors have reported back that this year’s award program was such a hit that it is motivating non-winners to do what it takes to win next year. As a manager I am aware of the power of that statement and how it can improve productivity and morale. Tim Andrews: Advertising specialties are often provided by an awards dealer as a way to serve customers who are asking for them and to gain incremental revenue that adds to the bottom line of its core awards business. Q. What does the future hold for the awards industry in relation to promotional products? Anne Lardner: Awards retailers have an incredible opportunity to further serve their customers by expanding their offerings to include promotional products. Today, marketing and branding strategies are calling for more personalized items, and promotional products are a perfect fit and a great way to bring more value to customers. Barry Slee: I don’t think the awards market as a whole has much to worry about from the promotional products industry. The big guns of the award industry are already tied closely to promotional products, but the thousands of small- and medium-sized award suppliers will continue to do their own thing—these are the suppliers that serve thousands of entities with which they have had long-term relationships. Dave Pomeroy: I think the lines between the two will continue to blur as individual businesses look for the competitive advantage. But for the average locally based awards shop, the ability to create short-run, quick turnaround, personalized products will always insure that there is a niche. And perhaps the competition between the two business models is creating a side benefit—higher-quality, more-original award products to choose from, as suppliers strive to stand out with their high-end product lines. Dave Natinsky: It is clear that all awards companies will be selling promotional products in their showrooms in the near future, but there is still a defining line between the two industries. Larry Maloney: The awards industry will always be linked in a very strong way to the promotional products industry. Despite some of the differences, corporate customers will always have a need for branded promotional products and awards. They motivate; they encourage great performance; they can simply make us feel good inside. I think that awards will grow as part of the promotional products industry as employers understand the motivation and even return on investment of a solid awards program. Tim Andrews: Promotional products are now more high-tech and inventive than ever and will grab the attention of your clients. There are imprinted digital picture frames, solar-powered cell phone chargers, and USB hubs that light up. Products that are friendly to the environment are also popular, like shirts made from bamboo fabric, tote bags manufactured from recycled plastic bottles, and hand-crank flashlights that don’t use disposable batteries. Any of these products can be a good fit for an awards customer. For example, let’s say that a client is buying plaques to present to a group at a special event. After the event is over, the client could create a mailing to the attendees that includes a USB drive with the event logo imprinted on it and that has digital pictures saved on it from the event. That USB drive would be a personal gift for guests that also serves as a memorable and useful keepsake, reinforcing the brand far beyond the actual event.
Awards Versus Promotional Products: A Game of Pac-Man?
December 2, 2009